LONG BEACH HOTEL PROPERTIES, LLC




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LONG BEACH HOTEL PROPERTIES, LLC
  TABLE OF CONTENTS
 PageNumberReport of Independent Auditors
    
    
    1Consolidated Balance Sheets
    
    
    2Consolidated Statements of Operations
    
    
    3Consolidated Statements of Changes in Members Equity
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    
    6




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1




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LONG BEACH HOTEL PROPERTIES, LLC
Consolidated Balance Sheets
 2010
    
    
    2009ASSETSCurrent assetsCash and cash equivalents
    
    $
    567,500
    
    
    $
    363,600Accounts receivable
    
    
    555,800
    
    
    
    1,002,600Prepaid expenses and other assets
    
    
    254,600
    
    
    
    206,500Total current assets
    
    
    1,377,900
    
    
    
    1,572,700Restricted cash
    
    
    201,900
    
    
    
    71,900Notes receivable
    
    
    1,538,200
    
    
    
    1,539,500Investments in Hotels, net
    
    
    65,653,900
    
    
    
    68,285,800Deferred franchise fees
    
    
    36,100
    
    
    
    Deferred loan costs
    
    
    64,900
    
    
    
    74,900Ground leases
    
    
    6,732,900
    
    
    
    600TOTAL ASSETS
    
    $
    75,605,800
    
    
    $
    71,545,400LIABILITIES AND MEMBERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    963,600
    
    
    $
    1,818,900Advance deposits
    
    
    266,400
    
    
    
    76,600Accrued expenses
    
    
    4,250,800
    
    
    
    1,020,600Current portion of debt
    
    
    21,100,700
    
    
    
    948,800Current portion of related-party loan
    
    
    11,747,400
    
    
    
    Total current liabilities
    
    
    38,328,900
    
    
    
    3,864,900Related-party loan
    
    
    
    
    
    
    6,309,100Debt
    
    
    36,572,600
    
    
    
    56,686,500TOTAL LIABILITIES
    
    
    74,901,500
    
    
    
    66,860,500Commitments and contingencies (Note 11)MEMBERS EQUITY
    
    
    704,300
    
    
    
    4,684,900TOTAL LIABILITIES AND MEMBERS EQUITY
    
    $
    75,605,800
    
    
    $
    71,545,400
   2




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LONG BEACH HOTEL PROPERTIES, LLC
Consolidated Statements of Operations
 2010
    
    
    2009REVENUESRooms
    
    $
    10,877,900
    
    
    $
    5,844,000Food & beverage and other income
    
    
    4,990,000
    
    
    
    1,748,100TOTAL REVENUES
    
    
    15,867,900
    
    
    
    7,592,100OPERATING EXPENSESRooms
    
    
    3,093,900
    
    
    
    2,320,900Food and beverage
    
    
    3,868,800
    
    
    
    2,068,000General & administrative
    
    
    1,712,300
    
    
    
    1,062,500Repair & maintenance
    
    
    813,200
    
    
    
    537,700Utilities
    
    
    609,200
    
    
    
    452,300Marketing
    
    
    1,296,400
    
    
    
    999,800Management fees
    
    
    567,100
    
    
    
    330,600Property taxes & insurance
    
    
    716,000
    
    
    
    312,800Asset management fee to related party
    
    
    218,100
    
    
    
    211,700Professional fees
    
    
    109,900
    
    
    
    15,200Depreciation
    
    
    3,112,100
    
    
    
    2,039,500Ground lease
    
    
    697,600
    
    
    
    605,700State tax fees
    
    
    14,200
    
    
    
    26,000Loan modification expenses
    
    
    947,200
    
    
    
    Other expenses
    
    
    625,100
    
    
    
    535,500TOTAL OPERATING EXPENSES
    
    
    18,401,100
    
    
    
    11,518,200NET OPERATING LOSS
    
    
    (2,533,200
    )
    
    
    (3,926,100
    )OTHER (INCOME) AND EXPENSESInterest income
    
    
    (129,400
    )
    
    
    (5,800
    )Interest and loan cost expenses
    
    
    4,630,800
    
    
    
    3,129,300NET LOSS
    
    $
    (7,034,600
    )
    
    $
    (7,049,600
    )
   3




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LONG BEACH HOTEL PROPERTIES, LLC
Consolidated Statements of Changes in Members Equity
 Contributed
    
    
    
    
    
    
    RetainedCapital
    
    
    Distributions
    
    
    Earnings (Deficit)
    
    
    TotalBalance at January 1, 2009
    
    $
    30,951,400
    
    
    $
    (19,589,800
    )
    
    $
    372,900
    
    
    $
    11,734,500Net loss
    
    
    
    
    
    
    
    
    
    
    (7,049,600
    )
    
    
    (7,049,600
    )Balance at December 31, 2009
    
    
    30,951,400
    
    
    
    (19,589,800
    )
    
    
    (6,676,700
    )
    
    
    4,684,900Net loss
    
    
    
    
    
    
    
    
    
    
    (7,034,600
    )
    
    
    (7,034,600
    )Contributions
    
    
    3,054,000
    
    
    
    
    
    
    
    
    
    
    
    3,054,000Balance at December 31, 2010
    
    $
    34,005,400
    
    
    $
    (19,589,800
    )
    
    $
    (13,711,300
    )
    
    $
    704,300
   4




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LONG BEACH HOTEL PROPERTIES, LLC
Consolidated Statements of Cash Flows
 2010
    
    
    2009Cash Flows from Operating ActivitiesNet loss
    
    $
    (7,034,600
    )
    
    $
    (7,049,600
    )Adjustments to net loss:Depreciation
    
    
    3,112,100
    
    
    
    2,039,500Amortization of deferred loan costs
    
    
    72,600
    
    
    
    71,900Changes in assets and liabilities:Accounts receivable
    
    
    446,800
    
    
    
    (696,000
    )Prepaid expenses and other assets
    
    
    (48,100
    )
    
    
    (97,300
    )Accounts payable
    
    
    (855,300
    )
    
    
    (4,416,600
    )Accrued expenses
    
    
    3,471,000
    
    
    
    588,400Advance deposits
    
    
    189,800
    
    
    
    49,000Net Cash Used in Operating Activities
    
    
    (645,700
    )
    
    
    (9,510,700
    )Cash Flows from Investing ActivitiesImprovements and additions to investments in hotels
    
    
    (480,000
    )
    
    
    (26,035,800
    )Deferred franchise fees
    
    
    (36,100
    )
    
    
    Notes receivable
    
    
    1,300
    
    
    
    (1,539,500
    )Change in restricted cash
    
    
    (130,000
    )
    
    
    1,702,700Net Cash Used in Investing Activities
    
    
    (644,800
    )
    
    
    (25,872,600
    )Cash Flows from Financing ActivitiesProceeds from long-term debt
    
    
    770,100
    
    
    
    30,564,800Repayment of long-term debt
    
    
    (4,698,800
    )
    
    
    (39,100
    )Payment of deferred loan costs
    
    
    (15,200
    )
    
    
    Proceeds from related-party loans
    
    
    6,645,200
    
    
    
    9,546,900Repayment of related-party loans
    
    
    (1,206,900
    )
    
    
    (4,604,900
    )Net Cash Provided by Financing Activities
    
    
    1,494,400
    
    
    
    35,467,700Increase in cash and cash equivalents
    
    
    203,900
    
    
    
    84,400Cash and cash equivalents, beginning of year
    
    
    363,600
    
    
    
    279,200Cash and cash equivalents, end of year
    
    $
    567,500
    
    
    $
    363,600Supplemental Disclosure of Cash Flow InformationCash paid during the year for:Interest (net of capitalized interest of $0 and $680,800
for 2010 and 2009, respectively)
    
    $
    2,633,100
    
    
    $
    2,950,184Taxes
    
    $
    14,200
    
    
    $
    26,000Supplemental Disclosure of Non Cash Investing and Financing ActivitiesNon cash investing and financing activities consist of the following:Acquisition of ground lease
    
    $
    6,780,000
    
    
    $
    Debt assumed related to admission of QWL as member
    
    
    (3,966,700
    )
    
    
    Accrued ground lease payment included as equity of QWL
    
    
    240,700
    
    
    
    QWL capital contributions (Note 11)
    
    $
    3,054,000
    
    
    $
    
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LONG BEACH HOTEL PROPERTIES, LLC
 
 Note 1  Nature of operations and principles of consolidated financial statements
   The Hotel Maya
  Residence Inn
  Note 2  Summary of significant accounting policies
 Principles of consolidation
  Cash and cash equivalents
  Accounts receivable
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LONG BEACH HOTEL PROPERTIES, LLC
 
 Prepaid expenses and other assets
  Restricted cash
  Notes receivable
  Capitalization of project development costs
  Investments in hotels
  Buildings and improvements
    
    
    10 to 39 yearsFurniture, fixtures and equipment
    
    
    3 to 7 years
  7




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LONG BEACH HOTEL PROPERTIES, LLC
 
  Business
Combinations,
 Impairment
  Deferred franchise fees
  Deferred loan costs
   8




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LONG BEACH HOTEL PROPERTIES, LLC
 
 Ground leases
  Advance deposits
  Income taxes
   Revenue recognition
  Use of estimates
   9




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LONG BEACH HOTEL PROPERTIES, LLC
 
 Concentration of credit risk
  Diversification risk
  Note 3  Notes receivable
    10




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LONG BEACH HOTEL PROPERTIES, LLC
 
 Note 4  Investments in hotels
  December 31,2010
    
    
    2009Buildings and improvements
    
    $
    62,953,900
    
    
    $
    62,756,500Furniture, fixtures, and equipment
    
    
    9,682,300
    
    
    
    9,399,20072,636,200
    
    
    
    72,155,700Less accumulated depreciation
    
    
    6,982,300
    
    
    
    3,869,900Net investment in hotels
    
    $
    65,653,900
    
    
    $
    68,285,800
  Note 5  Rental income
  Note 6  Management fees
 The Hotel Maya
   11




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LONG BEACH HOTEL PROPERTIES, LLC
 
 Residence Inn
   Note 7  Franchise fees
 The Hotel Maya
  Royalty Fee as aPercentage of GrossRooms Revenue2010 - 2011
    
    
    2.5
    %2012
    
    
    3.0
    %2013
    
    
    3.5
    %2014
    
    
    4.0
    %2015 - 2020
    
    
    5.0
    %
  Residence Inn
   12




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LONG BEACH HOTEL PROPERTIES, LLC
 
 Note 8  Asset management fees
  Note 9  Long-term debt
  December 31,2010
    
    
    2009(i) GE Loan *
    
    $
    20,569,500
    
    
    $
    24,299,400(ii) Connecticut General Loan
    
    
    31,800,000
    
    
    
    31,875,000(iii) Portside TOT Loan *
    
    
    1,337,100
    
    
    
    1,460,900(iv) Queensbay Ground Lease Loan *
    
    
    2,546,100
    
    
    
    (iv) Portside Ground Lease Loan *
    
    
    1,420,600
    
    
    
    Long-term debt
    
    $
    57,673,300
    
    
    $
    57,635,300
 
 *
    
    As described below, in 2011 the Company repaid this obligation (Note 12).   13




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LONG BEACH HOTEL PROPERTIES, LLC
 
       Years Ending December 31,
    
    Amount2011
    
    $
    21,100,7002012
    
    
    569,4002013
    
    
    612,0002014
    
    
    647,0002015
    
    
    696,200Thereafter
    
    
    34,048,000Total
    
    $
    57,673,300
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LONG BEACH HOTEL PROPERTIES, LLC
 
 Note 10  Related-party transactions
 Ground Lease
  Loans
  Note 11  Commitments and contingencies
     15




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LONG BEACH HOTEL PROPERTIES, LLC
 
  Year
    
    Amount2011
    
    $
    18,2002012
    
    
    17,1002013
    
    
    16,0002014
    
    
    16,0002015
    
    
    16,000Total
    
    $
    83,300
  Note 12  Subsequent events
 GE Loan
  Torrey Pines Bank Financing
   16




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LONG BEACH HOTEL PROPERTIES, LLC
 
 The Hotel Maya Management Agreement
  CWI Contribution Agreement
     17